New products introduced over the past year and a continued focus on exploring prospects in new business sectors are helping Savola Group achieve growth and expand influence in mainly Middle East markets.

Last year the group acquired all the capital shares of Egyptian pasta specialists Al Malika and Al Farasha thus expanding its foods portfolio beyond edible oils and sugar. The sugar division has introduced a sweetener line and is in the process of building its farms infrastructure prior to setting up a beetroot-based sugar mill in Alexandria, Egypt.

In its edible oils sector, Savola extended its brands range of Afia and Al Arabi in Saudi Arabia, launching Afia Sunflower. The result was a 3.5 per cent jump in Savola Food Company’s share of the Saudi market. Also launched were Alfa Canola in the Levant markets on a trial basis and the initial response has been very encouraging, according to the group.

United Sugar Company has launched a sweetener line

In the plastics sector, Savola introduced plastic stretch film, manly for exports to Europe and the GCC states. PET sheet with thermoforming capabilities and high-quality printing lines were commissioned during 2011.

Commenting on the acquisition of Al Malika and Al Farasha at a price of EGP 713 million ($117.5 million), the group said it was the biggest FMCG takeover in its history. El Maleka has a 35 per cent share of the Egyptian pasta market. “This acquisition aims at establishing a third pillar for Savola Foods in line with the company’s strategy set out in mid-2010. Savola Foods now has a strong foothold in the flour-based category that also represents a springboard for similar moves in Egypt and the region in the future,” a Savola group report said. 

Edible oils, sugar and plastics along with retail are the core businesses of the Savola Group. The company also has significant investments in leading publicly listed Saudi companies, investment funds and real estate businesses as well as a stake of 29.9 per cent in the food and beverage giant Almarai.

Focusing on its core businesses, Savola sold its shares in two plots in Riyadh and Jeddah for SR153 million ($40.7 million) as well as its 80 per cent stake in Al Munawwarrah City for SR631 million. 

The group recorded a net income of SR1.2 billion in 2011, up 35.6 per cent over the previous year, and consolidated revenues of SR25.2 billion, an increase of 19.8 per cent. Net income before capital gains and exceptional items was SR1.08 billion, highest in the company’s history.

Sector-wise contributions to group revenue were: edible oils 36.5 per cent, sugar 23 per cent, pasta 0.2 per cent, retail 36 per cent, plastics 3.9 per cent and others 1 per cent.

“The group maintained its leading competitive advantage locally and regionally despite the tough economic circumstances and bumpy road that the region has been travelling since early 2011,” said its chairman Sulaiman A Al Muhaidib. “The group has a strong financial position and is very proud of its sound corporate culture and management leadership and the competency of its human assets,” Al Muhaidib added.

The stronger performance in 2011 was attributed mainly to the turnaround in profitability of overseas operations in the foods sector, continuous sales growth and increased market share in the retail sector and capital gains resulting from the sale of land during the fourth quarter.

Containers made by Savola’s plastics division

At the end of the year, Savola Group directors forecast a net income of SR1.2 billion for 2012 before capital gains and exceptional items against SR1.08 billion in 2011. They also forecast  a first-quarter 2012 net income of SR220 million before capital gains and exceptional items. The latter projection has been bettered as the company announced a net income of SR242.3 milion for the first three months of this year.

FOOD DIVISION
This group’s flagship operating segment comes under the Savola Foods Company (SFC) which owns and manages subsidiaries with production facilities across 8 countries covering the North African, Middle Eastern and Central Asian regions. SFC reported consolidated revenues of more than SR15 billion, representing a 26 per cent growth over the previous year. Net income was SR489 million, more than double when compared with SR238 million in 2010. It raised its capital base from SR500 million to SR2.2 billion to match its current assets and investment size.

The company exports high-quality food to more than 30 countries globally. It introduced the pasta business when it acquired last year the Egyptian sister companies Al Malika and Al Farasha for EGP 713 million.

The subsidiary Afia International Company, 95.2 per cent owned by SFC, operates edible oils and fats operations in Saudi Arabia, Iran, Egypt, Turkey and Kazakhstan.

In the Arabia sector, Afia has a market share of 60 per cent in Saudi Arabia, about 26 per cent in the Gulf states and 30 per cent in the Levant markets.

Savola Food Company also owns 95.4 per cent of Savola Foods Emerging Markets (SFEM) Company (Edible Oils) with plants in Algeria, Sudan and Morocco.

In Algeria, SFEM reported  2011 sales of SR524 million, an increase of 47 per cent, and a market share in the country of about 33 per cent. The company moved from a loss of SR37.5 million in 2010 to a profit of SR23.5 million in 2011.

Savola has a sugar refining capacity of 2 million tonnes annually. One of the companies it operates is United Sugar Company, Saudi Arabia, which operates from Jeddah Islamic Port and is 75 per cent owned by Saudi Industrial Investments Company which is itself 95 per cent owned by Savola Foods Company.  United Sugar Company operates the third largest sugar refinery in the world with annual capacity of about 1.3 million tonnes. Its Al Osra brand holds 75 per cent of the Saudi market share. A sweetener was launched in 2011 under the Sweeva brand. Net revenues of the company exceeded SR4 billion, up 15 per cent and net income was SR253 million, a 1 per cent improvement.

The Azizia Panda market chain has grown rapidly

Savola Food Company owns 56.9 per cent of United Sugar Company Egypt. Another 19.2 per cent is owned directly by the Savola Group. Capacity of the plant is 800,000 tonnes and the sales volume in 2011 was 600,000 tonnes, the same as in the previous year. Net revenues were SR1.8 billion compared with SR1.5 billion and the net profit was SR3.5 million compared with a loss of SR105 million in 2010. The turnaround was due to the decrease in raw sugar prices, cost optimisation, macro management and liquidation of options, Savola Group said.

A third company in the sugar sector is Alexandria Sugar Company (ASC) in Egypt which is owned 62 per cent by United Sugar Company. This is the first integrated project within Savola. ASC’s target is to plant and harvest up to 70,000 acres annually to produce 1.3 million tonnes of sugar beetroot enough to operate at full capacity (9,000 tonnes per day) during the crushing season lasting 140 days. The factory will begin operations during 2013.

PLASTICS
Savola Plastics Company, owned fully by the Savola Group, reported 2011 sales of SR1 billion with 13 per cent growth. Net profit was SR 91 million compared with SR100 million, the drop attributed mainly to an increase in raw material prices. The company makes rigid and flexible packaging and operates seven plants – one in Jeddah, four in Riyadh and two in Alexandria. Last year it introduced plastic stretch film and commissioned PET sheet production with thermoforming capabilities. The company owns all the shares of Al Sharq Company, Riyadh, and New Marine Plastics, Alexandria.

RETAIL
The group operates its retail business through its subsidiary Azizia Panda United (APU) which opened 20 markets during 2011, bringing the number of markets, both Hyper Panda and Panda, to 131 in Saudi Arabia. There are 4 Panda markets in Lebanon and one in Dubai.

In 2011, APU reported sales of SR9.2 billion, an increase of 12 per cent. The net profit was SR200 million compared with SR66.4 million in the previous year.

Panda’s market share reached 8.1 per cent in the Saudi grocery retail market for food and consumer goods, making it the leading company in the Saudi retail sector. The company expects to add 19 new stores in 2012.